Q4 2023 Ambarella Inc Earnings Call
Thank you for joining our call today.
We achieved a significant milestone during the fiscal 2023, and our ongoing transformation to an AI company on the technology and product execution front with widely sampled the first of our third generation Hei Asos CV III cash ADT com.
Commence mass production of our first final either asos CV five introduce our centralized <unk> integrator and took an important step towards the <unk>.
Commercialization of our automotive software stack IP.
On the business front, we announced strategic partnerships with global automotive leaders, such as Bosch and continental.
And the customer interest and activity with our <unk> products continue to grow.
As of the end of the fiscal year.
Cumulative typically shipped more than 13 million computer vision Soc.
To more than 325 unique customers with more than 230 customers.
2000 to 30 customer products in production.
An increase of more than 50% from a year ago.
CV represented more than 45% of our physical 2023 revenue and there was a factor driving our full wide <unk> average selling price up.
In fiscal 2024, we expect CV to continue to grow in absolute dollars to spend about 60% of total revenue.
This is this is expected to continue to drive our ASP higher.
Fiscal 2023 was not without its challenges and also the year progress cyclical and economic headwinds became more significant negatively impacting our revenue results and outlook.
Despite the challenges in the second half of fiscal 2023, we reported record revenue.
Record annual revenue of $337 6 million.
Up about 2% year over year.
With our technology leadership and the scalability.
It's increasingly recognized by customers globally.
We don't believe the current softness has anything to do with the technical competitiveness of our new technology and products.
And we remain committed to build out a complete hai portfolio with <unk> and the software.
I would like to highlight some of the customer engagements.
Cause us to be so encouraged about our long term outlook.
During Q4, which we took two important steps towards the commercialization of our silver IP.
First the building up of Continental's November announcement that you would offer Adas solutions based on a broad CV three AI central domain controller on January 4th we announced continental ambarella with extending there.
Cooperation to include the full software stack development for Adas and autonomous driving applications.
The two companies will jointly develop scalable end to end hardware and software solutions with Ambarella sofa IP embedded in continental's pushback.
Second we announced in December that was first centralized 40 into radar architecture, combining <unk> adaptive AI radar software and a very efficient <unk> domain controllers enables the central processing, an infusion of a rule for the <unk> radar data with others.
The inputs, including camera Lidar and ultrasonics.
We believe this breakthrough architecture provides great environmental perception.
And a safer path planning in AI based <unk>, two alpha autonomous driving systems.
Business development momentum with our <unk> family was strong in a quarter or two.
In December <unk> announced it.
It plans to adopt the <unk> III family of EA Central domain controllers for the realization of our next generation Adas functions.
Partially requires efficient and flexible high performance computing as well as the scalability to enable software stack to be reused for level two to level four applications.
<unk> stated that they are adopting ambarella <unk> III family because it is the perfect fit to accelerate time to market and to create a scalable solution for their customers.
During CES, we announced <unk> 3080, 685, the first production <unk> Soc in the <unk> hundred 70, <unk> central domain controller for level two level four vehicles.
The surgery, Singapore Air engine in CV, three 685 increased neural network processing that is plenty times faster than previous generation will seek to associates, along with additional general vector processing capabilities to provide the overall performance required for autonomous driving stack processing include.
<unk> computer vision, 40 radar diffusion and planning.
We are proud note next generation transformer network have been successful successfully deployed by customers onto <unk>, III, which highlights the flexibility and efficiency of the architecture of autonomous driving and potentially other applications in the near future.
We had a highly successful CES 2023 with more than 200 customers. These customer meetings, and we demonstrated a wide range of automotive and Iot solutions, including many joint demonstration with our automotive tier one and a sofa partners.
Our <unk> won a CES 2023 innovation award in the embedded technologies category.
We offered them was right in our latest <unk> featuring a single CV three central domain controller, performing all perception classification and path planning functions and the processing both camera and the radar data.
<unk> included 15 cameras, and 90 radars with industry, leading power efficiency.
And together with Continental we demonstrated a single Cvs III committee to six eight megapixel cameras and a full three megapixel cameras, while running multiple noon hours on each video stream.
Utilizing about 10% of the Cvs III <unk> processor.
Odyssey is highlight highlights included Kodiak robotics.
<unk> is a self driving trucks integrating ambarella CV to AQR AI vision processor in the sense of path on both sides of this truck for the camera perception processing.
Hotel brands and the C machine demonstrated a combined from Adas and driving monitor solution running on a single <unk>.
The company has joined <unk> provide automakers with a streamlined single box multi camera solution, including up to eight megapixel forward facing camera and five megapixel in cabin camera.
And in February China, based hyper hyper view autonomy.
Tom What's driving technology company announced that it had a selective ambarella <unk> hundred <unk> family to develop a high performance computing autonomous driving platform.
The development of <unk> with <unk> software stack to provide potentially raise the perception automated driving and parking solutions.
Hi, preview has previously achieved mass production with multiple Chinese Oems and we are pleased they have chosen to incorporate <unk> into their new products.
I will now discuss some of our customers product introductions during the quarter.
We're extremely excited to announce our first 40 image radar project will soon be entering mass production at GBS Lotus technology unit.
<unk> intended to leverage a lot of technology and brand into market for higher volume passenger vehicles.
Lotus announced Elector pure electric SUV, which includes a 240 injuries are based on Ambarella is authorized radar technology, one in the front and what impact providing high resolution imaging camera capable of detecting and tracking vehicles within 300 meters and the protest.
With a 100 meters and accurately measuring the speed and the distance of objects.
After announcing our Cvs relationship with Apache and mobility.
Slight exciting excited towards extending the relationship to the <unk> two family of Asos.
During CES Porsche introduced its new connected right care platform and the companion <unk> camera based on <unk> 25, a processor. The product was honored at CES 2023, innovate Innovation Awards best of innovation honoree in the in vehicle Entertainment and safety cattle.
Corey.
Amazon Amazon ring at the show also introduced.
Green car can based on our H 'twenty two chip. The cockayne features do facing cameras and can monitor cost interior as well as on the rope.
<unk> also announced the <unk> 25 base Trashcan light camera Ics the camera provides 140 degrees of.
$40 40, HD views is included light view, SaaS alerts and location tracking.
In the enterprise security camera market European market leader Axis introduced a number of camera based on our CV 25.
The <unk> 88, <unk> compact on camera is an eight megapixel designed with WTO processing and the support for analytics with deep learning at age.
And the new small form factor and $10 55, and <unk> 75 box cameras targets small stores and the residential care applications and features H basis deep learning and the <unk>.
Korea market leader <unk> introduced three new enterprise class models in its 9000 camera serious all based on our CV to AI vision processor for <unk> models include box bullets in the panel has a remic designs and feature AI based analytics, including object classification license plate recognition.
And the car make and model of the combination.
Korean based <unk> also introduced its 60% to 81 <unk> camera based on our history, our vision processor and featuring 30 ex.
Capability.
This is really representative engagements illustrate how we are successfully leveraging our state of art.
Deposits inherently into larger more diverse and high quality markets for high bandwidth processors in the sulfur for machine sensing applications.
Majority of the early growth we have seen.
With our air products to date has been for new product cycles in existing Iot markets like access of our tackling.
In enterprise security camera engagements.
Just discussed.
But we are encouraged with our early success in critical new areas like our <unk> family of Central domain controllers for level two level for mobility applications.
<unk> III in a single Soc Gen.
Mystically, leveraging the functionality and bra has created created.
<unk> camera and the radar processing deep learning AI and automotive software stack IP.
While we are experiencing near term pressure on our revenue for cyclical and economic sectors. We firmly believe our secular growth opportunities has been very positive and we remain focused on leveraging our leadership positioning Hai.
AI is just beginning to transfer to so many of the industry and the we expected AI adoption to accelerate over the coming years in the AI inference market that is our area of focus.
Now I will hand, it over to Brian . Thank you.
Thanks, Jeremy I'll review, the financial highlights for the fourth quarter and full fiscal year 2023.
I'll also provide our financial outlook for our first quarter fiscal year 2024 and in April 32023.
I'll be discussing non-GAAP results and ask that you refer to today's press release for a detailed reconciliation of GAAP to non-GAAP results.
For non-GAAP reporting we have eliminated stock based compensation expense and acquisition related costs adjusted for the impact of taxes.
Fiscal year 2023 revenue increased one 7% to $337 6 million.
Iot revenue was a little more than three quarters of total revenue and declined slightly for the year.
Auto revenue increased over 10% to represent a little more than one quarter of total revenue.
For fiscal year 2023, non-GAAP gross margin was 63, 9% of.
50 basis points from 63, 4% in fiscal 2022.
non-GAAP operating expenses increased 17, 6% for the year.
With almost one quarter of incremental opex coming from <unk>.
Was acquired in Q4 fiscal year 2022.
And in cash and marketable securities totaled $207 million up from $171 million at the end of the prior year.
<unk>.
For fiscal Q4 revenue was $83 3 million in line with the midpoint of our prior guidance range.
That to the prior quarter and down 8% year over year.
non-GAAP gross margin for fiscal Q4 was 63, 5%.
Constant with our prior guidance range of 63% to 64%.
non-GAAP operating expense for the fourth quarter was $46 million, an increase of 6% from the prior quarter.
At the low end of our prior guidance range of $46 million to $49 million.
Lower operating expense was driven by expense management actions we took.
Our revenue outlook softened on customer inventory adjustments.
Yeah.
Q4, net interest and other income was $1 8 million.
Other income was higher than our original forecast driven primarily by an investment gain.
Our non-GAAP tax provision was a benefit of 200000 or minus two 3% of pretax income.
This was 600000 better than our original forecast driven by the mix of pre tax income across tax jurisdictions.
We reported non-GAAP net income was $8 9 million or <unk> 23 per diluted share.
Now I'll turn to our balance sheet and cash flow.
Fiscal Q4, cash and marketable securities increased $8 million to $207 million.
DSO increased slightly from 54 days to 57 days driven by the timing of shipments.
While days of inventory decreased from 124 to 116.
Cash from operations was $5 1 million and capital expenditures for tangible and intangible assets was $2 million.
Free cash flow defined as cash from operations less capex was $3 million.
We had two logistics and ODM companies represent 10% or more of our revenue in Q4.
WT microelectronics, a fulfillment partner in Taiwan that shifts to multiple customers in Asia came in at 50% of revenue.
Ciccone, an ODM, who manufactures for multiple Iot customers was 11% of revenue.
Now I'll discuss the outlook for the first quarter of fiscal year 2024.
While customer feedback on the level of end demand remains healthy.
Customers are aggressively managing down their inventory.
Consequently, we have experienced a more pronounced slowdown in bookings.
Along with customer requests to push out the timing of shipments and backlog.
For fiscal Q1, we estimate our revenue to be in the range of $60 million to $64 million.
We're down approximately 26% sequentially at the midpoint.
We expect this to be well below the levels and consumption supporting drawdown of customer inventory.
Visibility beyond our fiscal Q1 is limited.
However, we currently do not expect that future quarter revenue would need to decline below the level of our Q1 guidance for customer inventory management purposes.
We expect non-GAAP gross margin to be in the range of 62% to 64%.
Down approximately 50 basis points sequentially driven by lower volumes.
We expect non-GAAP opex in the first quarter to be in the range of 47% to $49 million with.
The increase compared to Q4, driven by the annual reset of payroll taxes in R&D for new product development.
We.
<unk> net interest income to be approximately 750000 or.
Our non-GAAP tax expense to be approximately 600000.
And our diluted share count to be approximately $39 9 million shares.
Ambarella will be participating in the Susquehanna Technology Conference on March 2nd and Morgan Stanley 's TMT Conference on March 7th please contact us for more detail.
Thank you for joining our call today and with that I'll turn the call over the operator for questions.
Thank you.
As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
These standby, while we compile the Q&A roster.
Our first question comes from Joseph Moore with Morgan Stanley . Your line is open.
Great. Thank you.
I Wonder if you could talk about what the next quarter.
Like kind of by end market, but your revenues are are down to levels that you saw when <unk> was a pretty small portion of revenue. So it seems like your units are down a lot is that true and pro surveillance and consumer surveillance is that true in auto can you just give us a sense of that end market mix.
I think I will.
I think.
Ryan will talk about the percentage of the total revenue, but I want to make some comment first of all I think the inventory correction impact the Iot a lot more than auto so I think that our percentage of revenue or 10 tend to auto a little bit, but however, our CV growth continue to maintain but also it looks like.
Inventory also impacted CV.
Revenue for hybrid like you said I think total unit number on the video processor is impacted I think for that reason there are multiple reasons, one definitely because of inventory correction. The more severe on the video processor side and also I think that.
You know the currently.
The two Chinese customer.
Aggregate Bahar four 3% last year two zero percent. This year the yearly number continue to drop and the third thing is so you can you'll have seen that we have been really focusing on growing.
Our CV silicon and we Havent really invest on the low end video processor chip roadmap. So I think that combination of <unk> III is a reason that we are seeing that the video processor unit number coming down yes.
Josef just to add embedded in our Q1 revenue forecast is an assumption that all.
Automotive revenue stays approximately flat quarter over quarter.
Which means that all of the sequential decline in revenue is attributable to our Iot business, where we're seeing the.
Significant inventory management actions being taken by our customers.
Okay. That's helpful and then just as a follow up.
As you look at that Iot business I.
I feel like the last couple of quarters, you felt like there was inventory reduction there do you still think that was the case and obviously thats intensifying in the April quarter, but do you think given your ships below consumption for the last couple of quarters.
Yes, I think so for example, <unk>.
We continue to total all of our customer on the Iot side by one of the Iot customer a pig was basically telling us that they forecast there their revenue will grow based on a product line basis based on the partner they are using our current silicon.
Most product line revenue grow double digit this year, but when we look at the revenue follows other lines we have.
<unk> seen.
Double digit revenue decline on our site. So we can see that it definitely there is a mismatch between our customers growth in our revenue guidance. So I think thats definitely is.
Some of the inventory correction and that will that's the reason we scaled down the Q1.
Understood. Thank you.
Thank you.
We have a question from Ross Seymore from Deutsche Bank. Your line is open.
Hi, guys. Thanks for let me ask a question.
Just one question one clarification on the question side of things, where do you think true end demand is if youre going to be down and I don't know if 35% sequentially on the Iot side of things.
They are somewhere around $40 million plus or minus.
How do you guys judge what true end demand is relative to that number.
Yes, I think.
The example, I just gave a.
A previous question I think our customers seeing double digit growth in their product line and we're seeing double digit decline on the revenue for our chip side. So I think there is definitely a 30% probably a little more than that in terms of the true demand differences.
And then I guess as far as the end market stuff that was helpful.
You gave the color for the sequential guide with automotive being flat, but the clarification part of my question, Brian and maybe I just wrote this down wrong, but for last year and maybe the fourth quarter. If you want to give that sequentially can you just remind us what the percentages work because I thought you said over 75% was Iot and over 25% was automotive and <unk>.
Obviously, those two don't make sense together.
Yes sure.
The comment was that a little bit less than 75% with Iot and a little bit more then.
Or was it related to automotive.
For the full year, we stated that automotive revenue was up about 10% on a year over year basis, while Iot declined slightly.
You look at the fourth quarter of both of those end markets were relatively flat sequentially.
Our total revenue between Q3 and Q4.
Got it thank you.
Thank you and my moment for our next question.
Comes from Matt Ramsey with Cowen Your line is open.
Oh pardon me.
I have a cough.
Hum.
In regard to your announced.
With Conti and Bosch.
Sure.
Oh, yes.
Any expectation.
Right.
Yes.
Yes.
Yes.
Yes.
Here, we are but I think I understand the question I think you are asking for our OEM customer engagement for CBRE.
Sure. Let me tell you I think after the Bosch and Conti announcements.
We definitely try to engage Oems route, but also trying to engage OEM by yourself is that now we have two weapon to engage the customer was using <unk> as the domain controller also using our 40 injury.
$3, a centralized radar solution to approach OEM. So we have been a success we are having.
Discussion.
And also potential engagement.
OEM on both fronts.
You can see that.
The engagement is probably I would say starting three months ago. After we simple CV three so I think that we have.
I definitely feel encouraged and very happy with the progress we've made and also the number of people who are engaging.
But we have we don't have any.
Probably announcement yet.
Got it thanks, and I know in regards to the inventory correction.
We're not looking to guide.
Beyond the first quarter, but any color that you like what do you see in him.
The trajectory of the recovery beyond.
The first quarter.
Yes.
We haven't really guides beyond Q1, but just like we said on the script I think that we think Q1.
From an inventory correction point of view I think was a low point and based on discussions we had there was a customer in terms of their projected.
The revenue the inventory level and our lead time I think that that's the best guess, we have at this point.
Thank you one moment for our next question.
We have a question from Vivek Arya from Bank of America. Your line is open.
Thanks for taking my question for me I'm curious the announcements you made with the tier ones, how exclusive or they unlike does it prevent them from engaging with your competitors in the semiconductor side and when is the earliest.
But do you think we will see any tangible benefits from those announcements as it anywhere in the next one to three years or is it like in the 26 plus kind of timeframe.
Right. So first of all I don't think Theres any exclusive relationship with any tier one announcing that we have but however, I would like to point out any engagement that.
For example, continental we want to work with our software stack and also so that alone is a huge come in on both sides. Both the need to put a significant resource. So although we don't have a legally exclusivity biopharma collaboration point of view I think it definitely will.
<unk> has been identified by us Thats important partner for us and they probably also think that <unk> can help them in their roadmap.
In China for example, the hyper view is a similar situation they have been using a competitor solution, but what <unk> three and I think that's all.
A solution that can really differentiate and the amount of our software development they need to put onto company towards projects.
Is significant so I think although there is no exclusivity, but I think.
Definitely it's a huge commitment for both sides.
Hi, Vivek, it's Louis just add that we've said in the past calendar year 'twenty six would be the first full year of revenue for CB, three and that Hasnt changed.
You've also talked about.
Now that we've gotten into account side Conti and Bosch with CV three we'd look to also promote CB two.
Which could potentially generate revenue earlier, and we did permitted announce a CV too specifically CV 25 win with Bosch mobility, which is our first CVT family win with Bosch Bosch mobility.
Very helpful and for my follow up actually I had a two parter one just a clarification.
Brian on receivables have been kind of creeping up over the last few quarters. Just wondering if there's anything more to read into that and then the main question for me for you. When you look at your automotive revenue I believe you said, 10% last year was that in line or different than your expectations in the year started because.
Drafting that with the automotive revenue growth that we saw from a number of other semiconductor companies that was in the range of anywhere between 20% to 45% last year. So just if you take a look back at your automotive revenue growth last year.
Was it in line with what you thought on what the puts and takes were.
Thank you.
Yes.
Okay.
I'll start with your question on DSO, and then turn it over to Fermi you right. So the last couple of quarters.
Q3 saw.
An uptick in DSO increase in accounts receivable and that was really driven by the timing of revenue shipments in this quarter. So.
Fiscal Q4 was a very backend loaded.
Revenue shipment quarter for us Consequently, we had a high level.
At the end of the quarter driving it that DSO.
And we had a fairly similar situation in Q3 as well so I think that corresponds to some of the softness that we've seen on the revenue side and as that plateaus and hopefully begins to lift off in the future. We should see a return to a more normal level.
Will a DSL.
In terms of the automotive growth I think at the beginning of year <unk> definitely grew more than 10% at the end that we show at the end I think the biggest reason is that in the first half that automotive market continued to see impact by the shortage of supply and we reported a lot of our customers in Japan and in.
China to that.
Impact on that so I think thats. The reason why the MTV, where the 20 plus percent automotive grows that we acquired early last year.
Thank you.
One moment.
We have a question from tore Svanberg with Stifel. Your line is open.
Yes.
I had a question about the announcement you had with Samsung for five nanometer.
I see your first CBOE products introduction with a night five nanometers, but just hoping you could elaborate a little bit more on timing you know how.
How much of your work with Samsung already on this node.
And any more color you could offer on that announcement would be great.
Youre talking about the announcement, we had with Samsung foundry unless <unk> chip.
But we use central foundry for that the automotive CV three chip.
Obviously, most TV production.
One I'm talking about.
Since that approach it.
So.
What we did was we announced that we see as we announce our first CV $386 85, chip, which is the first production worthy Soc for CVT family, and we announced that our central will be the foundry for the chip and the right. Now this is not our first five nanometer central foundry chip.
We already have five nanometer <unk> five that we assemble in fact going to production of Q3 Q4 last year and we are ramping up the production on that so far.
The.
Process no maturity I think were happy with it I think the yields is right at the level, we are expecting and also we expect that.
<unk> three chip.
Whole family probably coming through.
On the five nanometer.
The next two to three chips.
But the 6% deposits I mean, when would that be sampling.
I think while we expect to sample the chip early.
I would say early this year.
Right.
Second quarter this year sorry.
Got it thank you and just as a follow up obviously the software stack are key.
Big deal I mean, obviously you talked about the.
Partnerships with Bosch and continental.
As you continue to.
That's helpful.
Our stock are you starting to see some potential revenue streams.
Hardware related.
Non operated.
Yes, yes, yes, all right. So is there a possibility you could actually just sell the software stacks and some partners without selling citigroup.
Well.
I think first of all.
For the <unk>.
<unk> radar.
As announced with Gd right, that's our software running on the Ti chip, which is a unique opportunity because of that type projects started before the acquisition was.
<unk> acquisition after the acquisition when we look at the combined technology being agile in CV and our R series with domain controller, we believe a centralized radar is probably more meaningful and probably provide better.
The benefit to our customer so we are focusing our centralized radar right now so.
For the <unk> radar I think all the software revenue will be associated with our own chip.
Have a plan to run the software stack on our chips.
Understood. Thank you.
Yeah.
Thank you and our next question comes from David Kelley with Jefferies. Your line is open.
Hi team. This is Kevin Kennedy on for David Kelly Nice to hear that you keep your team achieved more than 45% overall CV mix in this fiscal year.
And I believe you said you expect 60% mix next year can you provide us with more details on the key drivers here.
And then related can you remind us if we just thoughts unexpected ASP trajectory.
Yes, so I think of that driver for the CV growth continue because I think I think even our <unk> two family continued to grow for example, we are showing a lot more customer or more products.
Our script, so the <unk> two family you're going to continue to drive the growth of the <unk> revenue on top of that we announced <unk> will be in production already for.
Production later last year and will ramp up revenue. This year, so that will help on driving the CVA.
Revenue.
On top of that when we assemble and <unk>. Three then you will talk about <unk> and plus other <unk> related development.
So those things combined will continue to drive the CV CV revenue.
ASP side like we said before we continue to expect our ASP.
Continuing to grow.
Next several years because of the <unk> asps higher <unk> ASP is even higher so that will continue to give us a very healthy growth on our asps side.
Got it and then switching gears I think last quarter. You expect you said that you expected operating expenses to ramp through fiscal year 'twenty four given increased spending requirements to support chip development is this still the case and if so can you just walk us through your Opex. The Opex drivers here. Thank you.
Right so in our guidance for fiscal Q1.
The sequential increase of about $2 million from <unk>.
Q4 over half of that sequential increase is associated with the reset of payroll taxes.
Impacts our companies at the beginning of the new calendar year.
The remainder of that increase is related to increased R&D activity associated with the build out of the CV III product family.
We're going to.
We're going to hold off on providing a full year outlook for opex at this point in time.
I can't tell you that we are.
Very seriously managing our operating expenses in light of the soft revenue environment that we're in currently.
We're doing that with a focus on preserving the timing of our new product introductions. So it's a permanent employee.
Get our products out on time, but in any other area, where we can squeeze experience with <unk>.
Taking those actions so it'll be a little bit dynamic as we move through the year and as we get a better feel for how the revenue materializes and so at this point, we won't be providing guidance on opex beyond Q1.
Understood. Thank you.
Thank you. Our next question comes from Kevin Cassidy with Rosenblatt Securities. Your line is open.
Thanks for taking my question.
If you can provide more details around the inventory correction.
Clearly, it's in the Iot products, but how much of it is the CV products versus the human interface.
Kind of the older devices.
So I think it's definitely Iot.
Most severely impacted.
Auto industry, but if you look at bridging of video processing CV I will say that the video processor is impacted more.
I think thats the reason for people who have.
Traditional products they have updated so that they usually you feel comfortable to build a lot more inventory.
The last two years, and that's where we're seeing that the video processor definitely has a more inventory out there than the computer vision chip.
That makes sense, okay, and heavier lead time stop coming in or.
They're slow improvement.
We continue to improve we still looking at roughly 30 weeks on average because we have a final on the 10 nanometer repack is definitely longer much longer than the 14 or 2020 nanometer process node and loss lead times roughly in 13 weeks.
<unk> as far as <unk> level.
Uh huh.
Our 40 nanometer and 20 nanometer liter is a little shorter than that and we continue to see that the puma for the foundry side.
Okay, great maybe if I could ask just one more.
Staying above your corporate target for gross margin.
Will it be volumes.
They come back that you expect gross margins to come back into that 59% to 62% range.
Yes, I think as we look forward to the rest of this fiscal year, we would expect gross margin to be in a similar range as we delivered last fiscal year in Q1 were a little bit lower obviously the revenue is down substantially. So we don't have a lot of fixed costs in the company.
Gross margin is not.
Very volatile as it relates to volumes, but when they move significantly we will see some impact.
But I think we're likely to remain at the high end of that model range that you mentioned for the rest of this fiscal year.
Okay, great. Thank you.
Yeah.
Thank you.
Next question comes from Brian <unk> with Imperial capital Your line is open.
Yes, a couple of quick questions on the security side of the business I assume the year fiscal 'twenty three ended with roughly 60% to 65% of total revenue from security.
Can you just confirm that and then number two if you could talk a little bit about the commercial demand in.
In the market, what youre seeing and if youre seeing any let up in that area.
Yeah.
So the I think the.
Security and all.
The total Iot revenue is roughly 75, maybe a little below 75%.
And that including both.
Enterprise.
The security camera consumer security camera as well as other revenue, we talked about having breakdown that so the total number of Iot is 74% pharma and demand side like I said most of our customers, especially enterprise customer base continue to see revenue growth.
Potential for this year, we talked to many customers and they still are optimistic that they are going to grow 10% to 15%.
The annual run rate.
For their part of their lives. So thats I don't think that end demand at least from based on what we have seen is not a problem at this point.
Okay are you seeing any let up in demand in the Iot on the consumer side or residential side on the.
Security cameras, we are seeing a drop in that area, but we're seeing demand on the commercial security Iot.
Dramatically up.
So our consumer side.
I think it's definitely a lower but it's not it does.
Trough doesn't explain what we are seeing from our customers drop of demand so I'll drop off.
Drop of the appeal to us so I really think there on the consumer side is a little weaker than the enterprise side, but I can say enterprise side, we haven't seen any drop at all.
Okay. Thank you.
Okay.
Thank you.
Our next question comes from Quinn Bolton with Needham <unk> Company. Your line is open.
Guys I just wanted to come back I guess to Ross's question about how much you're under shipping for me I think you said you thought you might be under shipping by as much as 30%, which would sort of imply revenue could be.
Well more than $10 million higher.
Well more than 10 million higher than where you are guiding for.
Fiscal Q1, I just want to make sure that Ive got those numbers right.
The numbers right, but that's for one customer so for the quarter average.
Cannot generalize that comment because not a lot of customer telling us where the inventory is a horse theyre projected growth is but this one customer we have a lot of visibility. So I think that we can find that one data point, we think 30% while we're looking at.
Got it that's that's one customer specifically.
I don't necessarily want to generalize that.
Correct.
Got it okay.
Longer term, obviously, I think a lot of excitement around the stores around the automotive side I'm just wondering.
The only update your auto pipeline once a year are there any other milestones you think investors can track on your.
Make progress to secure in the CB, three design wins with either continental or Bosch or Oems directly.
Well I think.
Any announcements costs, we need to go to all our customers approval and we probably need to think about whether we want to give people a hint about design win without mentioning names, but that's definitely decision, which we havent done that flow throughout the whole 10 years of public company. So we need to think about it.
I think that's why I think we're tracking our announcements and tracking our anew.
Tunnel updates is probably the best way at this point.
Got it okay. Thank you.
Thank you and our last question comes from Richard Shannon with Craig Hallum. Your line is open.
Well, thanks, guys for taking my questions.
I wanted to ask one kind of a two parter here on on Asps and growth here I can't remember if you mentioned what the gross number was for fiscal 'twenty three if you'd have that one I'd love to hear it and then.
Kind of responding to your response and are coming back in response to another question here about how to think about it for this year you just talked about growth can we think about ASP growth in percentage terms similar to last year, how should we characterize that.
I think that the.
Or.
Two years ago, ASP, probably roughly around $10 and this year, we're above $10.
Healthy margin, so I think that growth like I said, where consumers and I think this year, we're going to see similar growth rates.
Is precise.
Okay. That's helpful on the part of the question.
No I think you covered it Lisa so that sounds like yes, I think it's probably enough detail for there.
Second question here.
As we as we try to model this.
<unk>, 60% of sales in this current fiscal year up from 45, which is pretty significant growth had been trying to model is.
Between Iot and automotive and could we see <unk> be a majority of your Iot business or a clear majority of our business. This year. It seems like you would have to be.
Well, I think thats, where our assumption I think amount.
We talk about we shipped 13 million CVA socio cumulatively right now and Thats, a very healthy portion of that is automotive. So I think thats one one part of the answer the other part of the answer is yes, I think that.
Particularly on the enterprise.
Security camera side, we definitely expect that.
<unk>.
A majority of our assumed our beyond the <unk>.
Revenue side majority of our CV, our ability of our enterprise revenue will be based on <unk>.
Okay perfect that's all number.
Okay great.
There are no other questions in the queue I would now like to turn the conference back to Dr. Fermi Wang for closing remarks.
Yeah, well first of all.
Thank everybody who attended today's meeting I will talk to you next time. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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Good day, and thank you for standby and welcome to the Ambarella <unk> fourth quarter fiscal year 2023 earnings call. At this time, all participants are in a listen only mode.
Speaker's presentation there'll be a question and answer session to ask a question. During this session you will need to press star one one on your telephone.
You will then hear an automated message advising you your hand is rain.
Your question. Please press star one again.
Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today Louis.
Louis Greer Hardy corporate development. Please go ahead.
Thank you Catherine.
Good day, and thank you for joining our fourth quarter and fiscal year 2023 financial results call.
On the call with me today is Dr. Fermi, Wang President and CEO and Brian White CFO .
<unk> purpose of today's call is to provide you with information regarding the results for our fourth quarter and fiscal year 2023, the discussion today and the responses to your questions will contain forward looking statements regarding our projected financial results financial prospects market growth and demand for our <unk>.
Illusions among other things.
These statements are subject to risks.
The uncertainties and assumptions.
Should any of these risks or uncertainties materialize or should our assumptions prove to be incorrect.
Actual results could differ materially from these forward looking statements we're under no obligation to update these statements.
These risks uncertainties and assumptions as well as other information on potential risk factors that could affect our financial results are more fully described in the documents that we file with the SEC, including the annual report on Form 10-K that we filed on April one 2022 for fiscal year 2002.
92, ending January 31, two.
2022, and also the Form 10-Q filed on December nine.
2022 for the third quarter of fiscal year 2023.
Access to our fourth quarter and fiscal 2023 results press release transcripts historical results SEC filings and a replay of today's call.
Can be found on the Investor Relations page of our website.
From you will now provide a business update for the quarter.
Ian will review the financial results and outlook.
And then we will all be available for your questions.
Thank you Louis and good afternoon. Thank you for joining our call today.
We achieved a significant milestone during the fiscal 2023.
Ongoing transformation to an AI company on the technology and product execution front reportedly sampled the first of our third generation Hei asos.
<unk> 3000.
Commence mass production of our first financial neither asos.
<unk> five introduce our centralized <unk> and took important steps towards the.
Commercialization of our automotive software stack IP.
On the business front, we announced strategic partnerships with global automotive leaders, such as Bosch and continental.
And the customer interest and activity with our <unk> products continue to grow.
By the end of fiscal year.
Cumulative typically should more than 13 million computer vision <unk> to more than 325 unique customers with more than 230 customers.
2000 to 30 Kosmos products in production.
An increase of more than 50% from a year ago.
CV represented more than 45% of our physical 2023 revenue and there was a factor driving our firm wide <unk> average selling price up.
In fiscal 'twenty to 'twenty four we expect <unk> to continue to grow in absolute dollars to spend about 60% of total revenue.
This is this is expected to continue to drive our ASP higher.
Fiscal 2023 was not without its challenges and also the year progress cyclical and economic headwinds became more significant negatively impacting our revenue results and outlook.
Despite the challenges in the second half of fiscal 2023, we reported record revenue record annual revenue of $337 $6 million up about 2% year over year.
With our technology leadership and the scalability.
It is increasingly recognized by customers globally.
We don't believe the current softness has anything to do with their technical competitiveness of our new technology and products and.
And we remain committed to build out a complete hai portfolio with <unk> and the software.
I would like to highlight some of the customer engagements that caused us to be so encouraged about our long term outlook.
During Q4, which we took two important step towards the commercialization of our silver IP.
First the building up of Continental's November announcement that you would offer Adas solutions based on <unk> <unk> AI Central domain controller on January 4th we announced continental ambarella extending their.
Cooperation to include the full software stack development for Adas and autonomous driving applications.
The two companies while joined to develop scalable end to end hardware and our software solutions with Ambarella Sofa IP embedded in continental's pushback.
Second we announced in December that was first centralized 40 into radar architecture, combining ambarella is adaptive AI radar software and the efficient <unk> domain controllers enables the central processing in the fusion of Roku the injury dark data with others.
As of inputs, including camera Lidar and ultrasonics.
We believe this breakthrough architecture provides great environmental perception.
And a safer path planning in AI based <unk>, two alpha autonomous driving systems.
Business development momentum with our CVP family was strong in a quarter or two.
In December <unk> announced it.
It plans to adopt the <unk> III family of Aig's into domain controllers for the realization of our next generation Adas functions.
Policy requires efficient and flexible high performance computing as well as a scalability to enable software stack to be reused for level two to level four applications.
<unk> stated that they are adopting ambarella with Cvs III family because it is the perfect fit to accelerate time to market and to create a scalable solution for their customers.
During CES, we announced <unk> 80, 685, the first production Soc.
<unk> III family of AI Central domain controller for level two level four vehicles.
The surgery series will air engine in CV, three 685 increased neural network processing that is 20 times faster than previous relation with <unk>, along with additional general rector processing capabilities to provide the overall performance required for autonomous driving stack processing income.
<unk> computer vision, 40 radar diffusion and planning.
We are proud note next generation transform our network have been successful successfully deployed by customers onto <unk> III who'd you highlights the flexibility and efficiency over the architecture of autonomous driving and the push up potentially other applications in the near future.
We had a highly successful CES 2023 with more than 200 customers. These customer meetings, and we demonstrated a wide range of automotive and Iot solutions, including many joint demonstration with our automotive tier one and a silver partners.
Our <unk> won a CES 2023 innovation award in the embedded technologies category.
We offered them will rise in our latest <unk> featuring a single <unk> Central domain controller, performing all perception classification and path planning functions and the processing both camera and radar data.
<unk> included 15 cameras, and 90 radars with industry, leading power efficiency.
And together with Continental we demonstrated a single Cvs III committing to six eight megapixel cameras and a full three megapixel cameras.
Only multiple neural networks on each video stream utilizing about 10% of the <unk> III <unk> processor.
Obviously, you guys highlight highlights included Kodiak, and robotics, which exhibited is a self driving trucks integrating ambarella CV to Ecu AI vision processor in the sense of path on both sides of the truck for the camera perception processing.
Hotel brands and the C machine demonstrated a combined from Adas and driving monitor solution running on a single <unk>.
The company has joined after provide automakers with a streamlined single box multi camera solution, including up to eight megapixel forward facing camera and assigned megapixel in cabin camera.
And in February China, based hyper hyper view.
What's driving technology company announced that it had a selective ambarella <unk> hundred <unk> family to develop a high performance computing autonomous driving platform the.
The development of <unk> with <unk> software stack to provide catastrophe rating perception automated driving and parking solutions.
Hi, purview has previously achieved mass production with multiple Chinese Oems and we are pleased they have chosen to incorporate <unk> into their new products.
I will now discuss some of our customers product introductions during the quarter.
We're extremely excited to announce our first full day image radar project will soon be entering mass production at GBS Lotus technology unit.
Gd intended to leverage the logo technology and brand into market for higher volume passenger vehicles.
Lotus announced electric pure electric SUV, which includes a 240 <unk> injury dos based on Ambarella is authorized radar technology, one in the front and back providing high resolution imaging camera capable of detecting and tracking vehicles within 300 meters and the production.
With a 100 meters and accurately measuring the speed and the thesis of objects.
After announcing a series III relationship was a partial mobility will excite excited excited towards extending the relationship to the <unk> two family of Asos.
During CES Porsche introduced its new connected right care platform and.
The companion <unk> camera based on our <unk> <unk> processor the product was honored.
2023, innovate innovation awards best of innovation honoree in the in vehicle Entertainment and the safety category.
Amazon Amazon ring either show also introduce Green car can based on our 800000 to chip the cocky and features do facing cameras and can monitor the cars interior as well as on the road.
<unk> also announced the <unk> 25 base cash can live camera Ics the camera provides 140 degrees.
40, HD views is included my view.
<unk> alerts and location tracking.
Yeah.
In the enterprise security camera market European market leader access introduced a number of camera based on our <unk> 25.
<unk> 88, <unk> compared to hone camera is an eight megapixel design with WTO processing and our support for analytics with deep learning at age.
And the new small form factor and $10 55, and <unk> 75 box cameras targets small stores and residential care applications and features H based on deep learning and the 10 ATP video.
Korea market leader <unk> introduced three new enterprise class models in its 9000 camera serious all based on our CV to AI vision processor. The <unk> models include box bullets, and Panama have a remic designs and feature AI based analytics, including object classification license plate recognition.
In car and the car make and model the culmination.
Okay.
Korean based.
<unk> also introduced its 60% to 81 <unk> <unk> camera based on our history, our vision processor and featuring <unk>.
Capability.
This is really representative engagements illustrate how we are successfully leveraging our state of art <unk>.
Deposits inherited into larger more diverse and high quality market for high bandwidth processors and the sulfur for motion sensing applications.
A majority of the early growth we have seen with our air products to date has been for new product cycles in existing Iot markets like access of our tackling.
In enterprise security camera engagements.
Just discussed.
But we are encouraged with our early success in critical new areas <unk> III family over central domain controllers.
Two two level for mobility applications.
<unk> III in a single Soc.
So logistically leveraging of functionality and bra has created created over the years camera and radar processing deep learning AI and automotive software stack IP.
While we are experiencing near term pressure on our revenue for cyclical and economic sectors. We firmly believe our secular growth opportunities has been very positive and we remain focused on leveraging our leadership positioning Hai.
It's just beginning to transfer to so many of the industry and the we expected AI adoption to accelerate over the coming years in the AI inference market that is our area of focus.
Now I will hand, it over to Brian . Thank you.
Thanks, Jeremy.
I'll review the financial highlights for the fourth quarter and full fiscal year 2023.
Ill provide a financial outlook for our first quarter fiscal year 2024 and in April 32023.
I'll be discussing non-GAAP results and ask that you.
Third to today's press release for a detailed reconciliation of GAAP to non-GAAP results.
For non-GAAP reporting we have eliminated stock based compensation expense and acquisition related costs adjusted for the impact of taxes.
Fiscal year 2023 revenue increased one 7% to $337 6 million.
Iot revenue was a little more than three quarters of total revenue and declined slightly for the year.
Auto revenue increased over 10% to represent a little more than one quarter of coal revenue.
For fiscal year 2023, non-GAAP gross margin was 63, 9% of.
Up 50 basis points from 63, 4% in fiscal 2022.
non-GAAP operating expenses increased 17, 6% for the year.
With almost one quarter of the incremental opex coming from <unk>.
Was acquired in Q4 fiscal year 2022.
And in cash and marketable securities totaled $207 million up from $171 million at the end of the prior year.
For fiscal Q4 revenue was $83 3 million in line with the midpoint of our prior guidance range flat to the prior quarter and down 8% year over year.
non-GAAP gross margin for fiscal Q4 was 63, 5%.
Consistent with our prior guidance range of 63% to 64%.
non-GAAP operating expense for the fourth quarter was $46 million, an increase of 6% from the prior quarter, but.
But at the low end of our prior guidance range of $46 million to $49 million.
The lower operating expense was driven by expense management actions, we took as our revenue outlook softened on customer inventory adjustments.
Q4, net interest and other income was $1 8 million.
Other income was higher than our original forecast driven primarily by an investment gain.
Our non-GAAP tax provision was a benefit of 200000.
<unk> to 3% of pretax income.
This was 600000 better than our original forecast.
Driven by the mix of pretax income across tax jurisdictions.
We reported non-GAAP net income of $8 9 million or <unk> 23 per diluted share.
Now I'll turn to our balance sheet and cash flow.
Fiscal Q4, cash and marketable securities increased $8 million to $207 million.
DSO increased slightly from 54 days to 57 days driven by the timing of shipments.
While days of inventory decreased from 124 to $1 16.
Cash from operations was $5 1 million and capital expenditures for tangible and intangible assets was $2 million.
Free cash flow defined as cash from operations less capex was $3 million.
We had two logistics and ODM companies represented 10% or more of our revenue in Q4.
WT microelectronics, a fulfillment partner in Taiwan that shipped to multiple customers in Asia came in at 50% of revenue.
Ciccone, an ODM, who manufactures for multiple Iot customers was 11% of revenue.
Now I'll discuss the outlook for the first quarter of fiscal year 2024.
While customer feedback on the level of end demand remains healthy.
Customers are aggressively managing down their inventory.
Consequently, we have experienced a more pronounced slowdown in bookings along with customer requests to push out the timing of shipments and backlog.
For fiscal Q1, we estimate our revenue to be in the range of $60 million to $64 million were.
We're down approximately 26% sequentially at the midpoint.
We expect this to be well below the levels and consumption supporting drawdown of customer inventory.
Visibility beyond our fiscal Q1 is limited.
However, we currently do not expect that future quarter revenue would need to decline below the level of our Q1 guidance for customer inventory management purposes.
We expect non-GAAP gross margin to be in the range of 62% to 64%.
Down approximately 50 basis points sequentially driven by lower volumes.
We expect non-GAAP opex in the first quarter to be in the range of $47 million to $49 million with.
With the increased compared to Q4, driven by the annual reset of payroll taxes in R&D for new product development.
We estimate net interest income to be approximately 750000 or.
Our non-GAAP tax expense to be approximately 600000.
And our diluted share count to be approximately $39 9 million shares.
Ambarella will be participating in <unk> technology conference on March 2nd and Morgan Stanley 's TMT Conference on March 7th please contact us for more detail.
Thank you for joining our call today and with that I'll turn the call over to the operator for questions.
Thank you.
As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Please standby, while we compile the Q&A roster.
Yeah.
Our first question comes from Joseph Moore with Morgan Stanley . Your line is open.
Great. Thank you.
I Wonder if you could talk about what the next quarter.
Like kind of by end market, but your revenues are down to levels that you saw when <unk> was a pretty small portion of revenue. So it seems like your units are down a lot is that true and pro surveillance and consumer surveillance is that true in auto. So can you just give us a sense of that end market mix.
I think I will.
I think.
Brian will talk about the percentage of the total revenue, but I want to make some comment first of all I think the inventory correction impact the Iot a lot more than <unk>. So I think that our percentage of revenue or 10 tend to auto a little bit, but however, our CV growth continue to maintain but also.
Inventory also impacted our CV.
Revenue, but hybrid like you said I think the total unit number on the video processor is impacted I think for that reason there are multiple reasons, one definitely because of inventory correction the more severe on the deposit side and also I think that.
Uh huh.
The currently.
The two Chinese customer.
Aggregate Bahar four 3% last year two zero percent. This year the yearly number continue to drop and the third thing is so you can you'll have seen that we have been really focusing on growing.
Our CV silicon and we Havent really invest on the low end the video processor chip roadmap. So I think that combination of <unk> III is the reason that we're seeing that the video processor unit number coming down yes.
Yes Joseph.
Embedded in our Q1 revenue forecast is an assumption that.
Automotive revenue stays approximately flat quarter over quarter.
Which means that all of that sequential decline in revenue is attributable to our Iot business, where we're seeing the.
Significant inventory management actions being taken by our customers.
Okay. That's helpful and then just as a follow up.
As you look at Iot business.
I feel like the last couple of quarters, you felt like there was inventory reduction there do you still think that was the case and obviously thats intensifying in the April quarter, but do you think given your ships below consumption for the last couple of quarters.
Yes, I think so for example, while we continued total all of our customer on the Iot side, but one of the Iot customer a big one basically telling us that they forecast there their revenue will grow based on our product line basis.
Based on the product, they're using our current silicon.
Most product line revenue will grow double digit this year, but when we look at the revenue from those product lines, we are seeing.
Digital revenue decline on our side. So you can see that it definitely there is a mismatch between our customers growth in our revenue guidance. So I think thats definitely is.
<unk> of the inventory correction and our that's the reason we cut down the Q1.
Understood. Thank you.
Thank you.
We have a question from Ross.
Seymour from Deutsche Bank. Your line is open.
Hi, guys. Thanks for let me ask a question.
Just one question one clarification question side of things, where do you think true end demand is if youre going to be down and I don't know, 35% sequentially on the Iot side of things.
Seemingly are somewhere around $40 million plus or minus.
Do you guys judge what true end demand is relative to that number.
Yes, I think like I said, the example, I just gave.
In a previous question I think our customers seeing double digit growth in their product line and we're seeing double digit decline on the revenue for our chip side. So I think there is definitely a 30% probably a little more than that in terms of the true demand differences.
And then I guess as far as the end market stuff that was helpful.
You gave the color for the sequential guide with automotive being flat, but the clarification part of my question, Brian and maybe I just wrote this down wrong, but for last year and maybe the fourth quarter. If you want to give that sequentially can you just remind us what the percentages work because I thought you said over 75% was Iot and over 25% was automotive and obviously.
Those two don't make sense together.
Yeah sure.
The comment was that a little bit less than 75% with Iot and a little bit more than a quarter.
Quarter was related to automotive.
For the full year, we stated that automotive revenue was up about 10% on a year over year basis, while Iot declined slightly.
Look at the fourth quarter of both of those end markets were relatively flat sequentially.
Our total revenue between Q3 and Q4.
Got it thank you.
Okay.
Thank you and my moments for our next question.
It comes from Matt Ramsey with Cowen Your line is open.
Oh, okay.
No.
I have a quick question.
Sure.
In regard to your announced partnerships with Conti and Bosch.
Bye.
Any expectation.
Great.
I can't hear well, but I think I understand the question I think you are asking for our OEM customer engagement for CVT, It's actually a true let me tell you I think after the Bosch and Conti announcements.
We definitely try to engage Oems through then but also trying to engage your OEM by ourself.
We have two weapon to engage the customer was using <unk> as the domain controller also using a <unk> injury centralized radar solution to approach Oems. So we have been a success we are having discussion.
A discussion.
And also potential engagement with the Oems on both fronts and.
You can see that.
The engagement is really probably I would say starting three months ago. After we simple CV three so I think that.
I definitely feel encouraged and very happy with the progress we've made and also the number of people who are engaging with.
We have we don't have any.
Probably announcement yet.
Got it thanks, and I know in regards to the inventory correction, probably not looking to guide us.
Beyond the first quarter, but any color on that like what do you see intent.
The trajectory of the recovery beyond.
The first quarter.
Alright.
Yes, we haven't really guide beyond Q1, but just like we said on the script, but I think that we think Q1.
On the inventory correction point of view I think it is a low point.
Based on discussions we had there was a customer in terms of their projected.
The revenue the inventory level and our lead time I think that we are that's.
That's the best guess, we have at this point.
Thank you one moment for our next question.
We have a question from Vivek Arya from Bank of America. Your line is open.
Thanks for taking my question for me I'm curious the announcements you made with the tier ones, how exclusive or they are like does it prevent them from engaging with your competitors in the semiconductor side and when is the earliest.
But do you think we will see any tangible benefits from those announcements as it anywhere in the next one to two years or is it like in the 26 plus kind of timeframe.
Right. So first of all I don't think Theres any exclusive relationship with any tier one announcing that we have but however, I would like to point out any engagement that.
For example, continental we want to work with our software stack and also so that alone is a huge come in on both sides. Both the need to put a significant resource. So although we don't have a legally exclusivity biopharma collaboration point of view I think that definitely.
<unk> has been identified by us.
Thats important partner for us and they probably also think that <unk> can help them in their roadmap.
In China for example, the hyper view is a similar situation they have been using a competitor solution, but <unk> three and I think thats a solution that can really differentiate and the bulk of our software development they need to put on to commit to the project.
Is significant so I think although there is no exclusivity, but I think definitely has a huge commitment for both sides.
Hi, Vivek, it's Louis just to add that we've said in the past calendar year 'twenty six would be the first full year of revenue for CV, three and that Hasnt changed.
We'd also talked about.
Now that we've gotten into account site Conti and Bosch with CV three we'd look to also promote CV too which.
<unk> could potentially generate revenue earlier, and we did permitted announce a CV too specifically CV 25 win with Bosch mobility, which is our first CVT family win with Bosch Bosch mobility.
Very helpful and for my follow up actually I had a two parter one just clarification.
But Brian on receivables have been kind of creeping up over the last few quarters. Just wondering if there's anything more to read into that and then the main question for me for you. When you look at your automotive revenue I believe you said, 10% last year was that in line or different than your expectations when the year started because.
Tracking that with the automotive revenue growth that we saw from a number of other semiconductor companies that was in the range of anywhere between 20% to 45% last year. So just if you take a look back at your automotive revenue growth last year.
Was it in line with what you're talking about the puts and takes were.
Thank you.
Yes.
I'll start with your question on DSO, and then turn it over to Fermi.
So the last couple of quarters.
For Q3.
An uptick in DSO increase in accounts receivable and that was really driven by the timing of revenue shipments in the quarter or so.
Fiscal Q4 was a very backend loaded.
Revenue shipment quarter for us Consequently, we had a high level.
At the end of the quarter driving up that DSO.
And we had a fairly similar situation in Q3 as well so I think that corresponds to some of the softness that we've seen on the revenue side and as that plateaus and hopefully begins to lift off in the future. We should see a return to a more normal level.
Our DSO.
In terms of the automotive growth I think at the beginning of year <unk> grew more than 10% at the end that we show at the end I think the biggest reason is that in the first half that automotive markets continue to see impact by the shortage of supply and we reported a lot of our customers in Japan and.
China to that.
Impact on that so I think thats. The reason why the MTV, where the 20 plus percent automotive grows that we acquired early last year.
Thank you.
One moment.
We have a question from tore Svanberg with Stifel. Your line is open.
Yes.
Thank you I had a question about the announcement you had with Samsung for five nanometer.
We see your first CBOE products.
Production with a net five nanometers, but just hoping you could elaborate a little bit more on timing.
How much of your work with Samsung already on those nodes.
And any more color you can offer them nobody else that would be great.
You're talking about the announcement, we had with Samsung foundry on the CV III <unk> chip.
We use central foundry for that the automotive CV three chip.
Oh, you're talking about <unk> five production.
One I'm talking about the six would approach it.
Yeah. So.
What we did was we announced that we see as we announce our first CV $386 85, chip, which is the first production worthy Soc for CVT family, and we announced that our central will be the foundry for the chip and right. Now this is not our first finite millimeter central foundry chip.
We already have five nanometer <unk> five that we assemble in fact going to production of Q3 Q4 last year and we are ramping up the production on that so far.
The PA.
Process no maturity I think were happy with it I think that the yields is the level. We are expecting and also we expect that.
<unk>, three chip or the whole family probably coming through.
Five nanometer.
For the next two to three chips.
But the 685.
Would that be sampling.
I think while we expect to sample the chip early.
I would say early this year.
Right very good.
The second quarter this year sorry.
Got it thank you and just as a follow up obviously the software stack.
Big deal I mean, obviously you talked about the.
Partnerships with Bosch and continental.
As you continue to.
That software stock are you starting to see some potential revenue streams are non hardware related.
Now automated.
Yeah. So yeah. So is there a possibility you could actually just sell the software stack with some partners.
Selling cigarettes.
Well.
I think first of all first quarter of <unk>.
The <unk> radar, we just announced with Gd right. That's our software running on the Ti chip, which is a unique opportunities because of that type projects started before the acquisition was.
Before the acquisition.
After the acquisition, where we look at the combined technology being ocular and the CV and the hour our symmetry command control that we believe are centralized radar is probably more meaningful and probably provide better.
The benefit to our customer so we are focusing our centralized radar right now so Oklahoma.
For the <unk> radar I think all the software revenue will be associated with our own chip. We don't have a plan to run the software stack on other chips.
Understood. Thank you.
Yeah.
Thank you and our next question comes from David Kelley with Jefferies. Your line is open.
Hi team. This is Kevin Kennedy on for David Kelly Nice to hear that your team achieved more than 45% overall CV mix in this fiscal year.
And I believe you said you expect 60% mix next year can you provide us with more details on the key drivers here and there.
Then related can you remind us if we just thoughts on unexpected ASP trajectory.
Yes, so I think that driver for the CV growth continue because I think I think even our <unk> family continued to grow for example, we are showing a lot more customer or more products mentioned in our script. So the <unk> two family you're going to continue to drive the growth of the CV revenue on top of that.
We announced <unk> will be in production already.
Production later last year and will ramp up revenue. This year, so that will help on driving the CV revenue.
On top of that when we assess assembly <unk>. Three then you will talk about <unk> and plus other <unk> related development.
So those things combined will continue to drive the CV CV revenue.
ASP side like we said before we continue to expect our ASP.
Continue to grow.
Next several years because of the <unk> asps higher CD three asp's even higher.
That will continue to give us a very healthy growth on our asps side.
Got it and then switching gears I think last quarter. You expect you said that you expected operating expenses to ramp through fiscal year 'twenty four given increased spending requirements to support chip development is this still the case and if so can you just walk us through your Opex. The Opex drivers here. Thank you.
Right so in our guidance for fiscal Q1.
The sequential increase of about $2 million from FIS.
Q4 over half of that sequential increase is associated with the reset of payroll taxes that.
Impacts our companies at the beginning of the new calendar year.
The remainder of that increase is related to increased R&D activity associated with the build out of the <unk> III product family.
We're going to.
We're going to hold off on providing a full year outlook for opex at this point in time.
I can't tell you that we are <unk>.
Very seriously managing our operating expenses in light of the soft revenue environment that we're in currently.
We're doing that with a focus on preserving the timing of our new product introductions. So it's a permanent employees that way.
Get our products out on time, but in any other area, where we can squeeze experience.
We're taking those actions so it'll be a little bit dynamic as we move through the year and as we get a better feel for how the revenue materializes and so at this point, we won't be providing guidance on opex beyond Q1.
Understood. Thank you.
Thank you. Our next question comes from Kevin Cassidy with Rosenblatt Securities. Your line is open.
Thanks for taking my question just some if you can provide more details around the inventory correction.
Clearly, it's in the Iot products, but how much of it is the CV products versus the human interface.
Kind of the older devices.
So I think it's definitely Iot us more severely impacted than others.
The auto industry, but if you look at between the video processor CV I will say that the video processor is impacted the more I think thats the <unk>.
Reason for people who have a.
Traditional products they have updated so that they usually feel comfortable to build a lot more inventory.
In the last two years and Thats, where were seeing that the video processor definitely has a more inventory out there than the computer vision chip.
That makes sense, okay, and heavier lead time stop coming in or is other slow improvements in my head.
We continue to improve we still looking at roughly 30 weeks on average because we have a finite on the 10 nanometer repack is definitely longer much longer than the 14 or 2020 nanometer process node and loss lead times dropdown. So a few weeks.
<unk> as well as 60 level.
14 nanometer and 20 nanometer lead times, a little shorter than that and we're continuing to see that the improvement on the foundry side.
Okay, great maybe if I could ask just one more.
Staying above your corporate target for gross margin.
Will it be volumes.
They come back that you expect gross margins to come back into that 59% to 62% range.
Yes, I think as we look forward to for the rest of this fiscal year, we would expect gross margin to be in a similar range as we delivered last fiscal year in Q1 were a little bit lower obviously the revenue is down substantially. So we don't have a lot of fixed costs in the company.
Gross margin is not.
Very volatile as it relates to volumes, but when they move significantly we will see some impact.
But I think we are likely to remain at the high end of that model range that you mentioned for the rest of this fiscal year.
Okay, great. Thank you.
Yeah.
Thank you.
Next question comes from Brian <unk> with Imperial capital Your line is open.
Yes, a couple of quick questions on the security side of business I assume the year fiscal 'twenty three ended with roughly 60% to 65% of total revenue from security.
Can you just confirm that and then number two if you could talk a little bit about the commercial demand in.
In the market, what youre seeing and if youre seeing any let up in that area.
So the I think.
No.
Security and overall.
Total Iot revenue is roughly 75, maybe a little below 75%.
That including both.
Enterprise.
The security camera consumer security camera as well as other revenue, we talked about having breakdown.
The total number of Iot 17, 4% pharma and demand side like I said, you know most of our customers, especially enterprise customer base continue to see revenue growth.
Potential for this year, we talked to many customers and they still are optimistic that they are going to grow 10% to 15%.
The annual run rate for <unk>.
They are part of life. So thats I don't think that end demand as its foundation.
While we have seen is another problem at this point.
Okay are you seeing any let up in demand in the Iot on the consumer side or residential side on the.
Security cameras.
We're seeing a drop in that area, but we're seeing demand on the commercial security Iot.
Dramatically up.
So our consumer side, you know that I think it's definitely lower but it's not it does.
Trough doesn't explain what we are seeing from our customers drop of demand. So trough drop of the appeal to us. So I really think there on the consumer side is a little weaker than the enterprise side, but I can say enterprise side, we haven't seen any drop at all.
Okay. Thank you.
Yeah.
Thank you.
Our next question comes from Quinn Bolton with Needham <unk> Company. Your line is open.
Hey, guys I just wanted to come back I guess to Ross's question about how much you're under shipping for me I think you said you thought you might be under shipping by as much as 30%, which would sort of imply revenue could be.
Well more than $10 million higher.
Our consumption well more than $10 million higher than where you are guiding for.
Fiscal Q1, I just want to make sure that Ive got those numbers right.
The numbers right, but that's for one customer so for the quarter average.
Cannot generalize that comment because not a lot of customer telling us where the inventory is a horse that projected growth is but this one customer we have a lot of visibility. So I think that we can from that one data point, we think 30% is what we're looking at.
Got it that's that's.
That's one customer specifically yet.
Not necessarily want to generalize that.
Correct.
Got it okay.
Longer term, obviously, I think a lot of excitement around the stores around the automotive side I'm just wondering.
You only update your auto pipeline once a year or are there any other milestones you think investors can track on your.
You make progress securing the CVT three design wins with either continental or Bosch or Oems directly.
Well I think.
And you announced those customers need to Golar.
Customers approval, and we probably need to think about whether we want to give people a hint about the value of what I've mentioned them, but that's definitely decision, which we havent done that throughout the whole 10 years of public company. So we need to think about it.
I think that's why I think we're tracking our announcements and tracking our.
<unk>.
Final updates is probably the best way at this point.
Got it okay. Thank you.
Thank you and our last question comes from Richard Shannon with Craig Hallum. Your line is open.
Well, thanks, guys for taking my questions.
I wanted to ask one kind of a two parter here on on Asps and growth here I can't remember if you mentioned what the gross number was for fiscal 'twenty. Three if you would have that what I'd love to hear it and then.
Kind of responding to your response and are coming back in response to another question here about how to think about it for this year you just talked about growth can we think about ASP growth in percentage terms similar to last year, how should we characterize that.
Yes.
I think that.
Two years ago, ASP, probably roughly around $10 and this year, we're above $10, but healthy margin. So I think that growth like I said will continue and I think this year, we're going to see similar growth rates on a precise.
Okay. That's helpful on the part of the question.
No I think you covered it Lisa so that sounds like yes, I think it's probably enough detail for there.
Second question here.
We as we try to model this.
CV being 60% of sales in this current fiscal year up from 45, which is pretty significant growth I've been trying to model us.
Between Iot and automotive and could we see <unk> be a majority of your Iot business or a clear majority of our business. This year. It seems like you would have to be.
Well I think thats, the right assumption I think amount.
We talk about we shipped 13 media CVA associate cumulatively right now and there is a very healthy portion of that is automotive. So I think thats one part of the answer the other part of the answer is yes, I think that.
Particularly on the enterprise.
Security camera side, we definitely expect to that.
<unk>.
A majority of our assuming our beyond <unk>.
Revenue side majority of our CV, our ability of our enterprise revenue will be based on <unk>.
Okay perfect that's helpful.
Okay great.
Yeah.
There are no other questions in the queue I would now like to turn the conference back to Dr. Fermi Wang for closing remarks.
Yes, well first of all to thank everybody who attended today's meeting I will talk to you next time. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.